By Michael Swanger

In music, when a musician plays one phrase and another musician responds or “comments” with a phrase of his own, it is known as “call and response.” And though each phrase may differ in terms of intonation, pitch or rhythm they often harmonize.

Call and response reflects a pattern of human communication, though not every exchange is in unison. That much is evident in the dispute between a local nightclub and a performing rights organization based in Nashville and New York — the results of which has left a Capital City live music venue singing the blues, and might serve as a wake-up call to businesses that are unlicensed.

Broadcast Music Inc. (BMI) has sued Platipus Productions Inc., the owners of Blues on Grand, for copyright infringement for the unlicensed public performance of songs from BMI’s extensive catalog that includes more than 300,000 songwriters and 6.5 million tunes — nearly half of the music played in the U.S. every day. BMI collects annual fees for a blanket license from radio, television, retail, restaurants, nightclubs and concert promoters for the use of its repertoire and pays royalties to its affiliated songwriters and publishers with the revenue collected from those fees. A judge ruled in BMI’s favor after determining that the downtown nightclub broke its contract with BMI after it failed to pay royalties for music played there during the past four years.

Blues on Grand’s manager Jeff Wagner says BMI told the Des Moines venue it was required to purchase a BMI license in the fall of 2002 after its researchers (BMI often sends music teachers or musicians to clubs to document set lists) reported the club was hosting music licensed by BMI songwriters and publishers. He says the nightclub’s owner, Ron Boone, made a partial payment to BMI in late 2002 for an annual license fee of $1,800, but didn’t realize the contract renewed itself automatically the following year. The club’s management ignored BMI’s subsequent bills saying the contract was invalid because it was signed under duress and that they didn’t agree with BMI’s license structure.

Last year, Blues on Grand was served a subpoena for its past due bill, totaling $9,600 in unpaid licensing fees, service charges and interest. On Sept. 22, four Polk County Sheriff’s deputies and a Des Moines Police officer served a court order to confiscate cash from the club’s register and doorman. It was the first of four such levies served during a three-week span by local law enforcement officials, which netted about $3,000.

Wagner says the club has made a “significant” down payment to pare down the remainder of monies owed to BMI. A handful of patrons and local bands are hosting a benefit concert on Sunday entitled “The Shakedown Downtown” to help Blues on Grand pay off the balance of its BMI bill, including its yearly license. Wagner says the club has no legal choice other than to pay BMI, but he wants fellow club owners to learn that if they’re found operating without a BMI license, they risk losing thousands of dollars in a court settlement to an industry that has never lost a trial case.

“We’re paying BMI under protest because we know we can’t win,” he says. “But that doesn’t make it right. Any lawyer a club owner could afford doesn’t stand a chance against their multi-million-dollar legal team.”

Jerry Bailey, director of media relations for BMI based in Nashville, says it’s an open-and-shut case. He says BMI is within its legal right to pursue such actions against Blues on Grand to protect and compensate its clients.

“I realize that not all the songs played there are cover tunes, but a percentage of them would be,” Bailey says. “If you write your own songs you have the right to perform them in a public place, but most of your blues hits and standards are affiliated with BMI, and he has a real problem if he’s going to continue to play those songs in his establishment without a license.”

Bailey says BMI wrote off several thousand dollars when Blues on Grand breeched its contract. If BMI pursued an infringement lawsuit in court the nightclub could pay several thousand dollars more in damages, legal fees and court costs. Statutory damages range from $750 to $30,000 per song, but in cases of willful infringement the court can demand payment of up to $150,000 per song. BMI deals with about two-dozen such cases each year, and more than 90 percent of them are settled out of court, Bailey says. However, those that do reach a judge, he adds, are usually assessed only $3,000-$4,000 per song.

“We rarely ask for willful infringement from the court because we don’t want to put anybody out of business,” Bailey says. “We don’t even like to throw those numbers out because we don’t want to look like the bad guy. We want people to see us as fair and reasonable, which is what we are. We simply want to license them to recover our damages and court fees. The bottom line is it’s always cheaper to license music before an infringement suit is filed.”

Bailey says BMI asks for such high-dollar damages in certain cases to discourage other business owners from doing the same thing.

“To waste this amount of time with every business we licensed it would be hard to get anything else done,” he says, noting that in fiscal year 2005 BMI distributed 86 percent of its license fees to its affiliates and works hard to maintain a low overhead. “We don’t want to reward anyone for dragging their feet and giving us the runaround. The law on this is clear.”

Federal law may be on BMI’s side, but like many business owners and some artists, Wagner has a laundry list of grievances regarding BMI’s licensing system, ranging from its alleged use of intimidation to collect money, to the “reasonable fee” it charges customers for a list of songs it licenses. The biggest issues, he says, are how BMI determines its licensing fees and how it pays a pittance in royalties to the majority of BMI licensed artists who play his club.

The cost of a BMI license depends on the type of business, its size and the intensity of music use. In general, Bailey says, smaller businesses using less music pay less than larger businesses using more music. All businesses are required to use an online form (www.bmi.com) but a number of factors, including occupancy, number of nights live music is offered, number of musicians employed, cover charges and whether or not the club has a dance floor, influences the cost of a license. A typical restaurant pays $600 annually, but live-music venues pay more.

BMI recently sued local nightclub owner J. Michael McKoy after he failed to renew his BMI license for five of the past six years while playing BMI licensed songs at Miss Kitty’s Dance Hall and Cyber Saloon in Clive. McKoy, who owns two other clubs and is a radio talk-show host, says he supports BMI’s efforts to pay and protect its customers, but disagrees with the method by which it determines its fees and its modus operandi.

“BMI is a federally-licensed monopoly that really has little accountability,” he says. “How is it they’ve never lost a case? This is a bureaucracy, and because of the bureaucracy they’re operating legally.”

McKoy says BMI tried to sue him for more than $50,000, but he settled with them out of court for about $18,000. He says he didn’t mind paying extra to make his point.

“Most guys buckle under and pay it,” he says. “I didn’t.”

Still, McKoy must pay about $2,000 a year to BMI to play its music. He says the fee has nearly tripled from when he paid about $700 in 1998, which fuels his skepticism about BMI’s lack of regulation. [Bailey says yearly fees are adjusted according to a consumer price index.]

“The core value of BMI is necessary for artists,” McKoy says. “There just has to be some regulation. This is David and Goliath. The lawmakers are going to have to get involved. I’m a huge believer in the difference between man laws and god laws. We can change man laws. Our political leaders need to look at this.”

Blues on Grand pays $995 a year based on its fire code occupancy for a BMI license, but the license fee also includes additional charges for recorded music played between sets, the right to charge admission, to host dancing and have a television, which brings the license’s total to about $1,800.

“It’s like having to pay for the same thing over and over again,” Wagner says. “I could go to karaoke or take away a night of music, which would be cheaper in terms of licensing, but it would put a local band out of a job and I’m not going to do that. We’re a music venue, not a neighborhood bar.”

Bailey admits that clubs that host DJs playing recorded music or karaoke pay less than live music venues even though they use music just as intensely. But he says BMI’s licensing is based on generalities that apply to most of its 600,000 licensees.

“BMI deals with quantity and efficiency,” says Bailey. “The problem is no license is going to be perfect 100 percent of the time. There’s always going to be exceptions. You could argue that every category isn’t fair. Those licenses are designed for the majority of our business owners. It’s still better than licensing songs on your own with each individual songwriter or publisher.”

Like it’s licensing fees, Bailey says the way BMI determines royalty payments isn’t perfect, but it’s workable. BMI royalty payments are market driven, determined by 450,000 hours of radio airplay in all formats, as well as more than 400 census stations that are monitored totaling nearly 4.2 million hours of annual radio airplay, six million local television program hours and 6.5 million network television program hours to gain insight into what music is being performed. BMI also gathers performance information from commercial music services and the top 200 grossing tours, most of which play commercial forms of music like hip-hop and pop.

But venues like Blues on Grand, which features traditional or non-commercial music, contend that while BMI collects licensing fees the money rarely reaches BMI artists who play there.

“The first night they raided the club Albert Cummings was playing,” Wagner says. “He’s been a BMI artist for four years, and during that time he’s received a check for 7 cents. It’s a joke.”

Bailey says BMI is rolling out new technology like Blue Arrow, a digital monitoring device that can measure sounds undetected by the human ear. He says Blue Arrow will allow BMI to monitor every radio station in a market in hopes of getting a more accurate reading of what’s being played. However, Blue Arrow is only being used in large markets.

“Most revenue songwriters earn comes from radio and television, not from nightclubs,” Bailey says. “They account for about 3 percent of the money we collect. If we handled reports from all those businesses it would probably consume all the fees they are paying. It would not be efficient or effective. The way royalties work is you tend to make most of your money when you have a hit song.”

Still, some working musicians say BMI should find a way to better measure live performances to compensate them. ASCAP and BMI divide about $1.3 billion each year and the average BMI songwriter receives about $5,000 in royalties each year. Some BMI songwriters and publishers, however, don’t receive any money.

“They’ve not sent me one dime,” says Vaan Shaw, a BMI licensed songwriter and Chicago blues artist who plays Blues on Grand and other clubs like it around the world with his father’s band, Eddie Shaw and the Wolfgang. “Not many guys in the blues are getting royalties. It’s like it was years ago. They apologize every time I call them, but apologies don’t cut it.”

Wagner says he has heard a number of similar complaints from club owners and artists.

“All the clubs and musicians think it’s unfair, and I’m siding on the side of the majority,” he says. “With a $60 million operating budget they can’t come up with a system that’s more accurate? Blues isn’t even one of the categories you can check on your application for a license. It’s taking from the poor and paying the rich.”

Bailey says that isn’t true. BMI counts icons like Muddy Waters, Howlin’ Wolf, John Lee Hooker, B.B. King, Willie Dixon and Buddy Guy — influential songwriters whose tunes are staples of most blues bands — among its 300,000 members. He adds that BMI has been a longtime supporter and defender of blues composers dating back to its inception in 1939 when other PRO groups, including ASCAP, refused to represent them. Earlier this year, BMI won the “Keeping the Blues Alive” award from the Blues Foundation for “Sponsor of the Year” — the same group that named Blues on Grand “Blues Club of the Year” in 2002.

“There were a lot of people who ripped off the old blues artists; signed them to recording contracts and never paid them a penny,” Bailey says. “That’s probably why so many of them signed with BMI. ASCAP didn’t want them and BMI was always square with them. Bo Diddley, who has been with BMI for 40 years, said to the L.A. Times ‘BMI is one of the few organizations that doesn’t get funny with the money.’”

Bruce Iglauer, owner of Alligator Records in Chicago, concurs. He is a licensed BMI songwriter and publisher, but many of his acts play Blues on Grand.

“As a BMI songwriter and publisher it’s hard for me to speak to this because I’ve received a few good checks from BMI,” Iglauer says. “It’s hard for me to know whether the money goes to the writers. Is it fair? Could it be fairer? Maybe. But that might involve more reporting and bookkeeping.

“I don’t think this is a story about good guys and bad guys,” he says. “Jeff’s a friend to the music we both love, and Blues on Grand has become a nationally known blues club in a second market, in a second city that doesn’t offer a lot of support to blues and struggles with media exposure. To me, the story is about a respected blues club that has found itself in a tough financial situation.”

Wagner says the debt owed to BMI does put a financial strain on the club. Two other performing rights organizations, ASCAP and SESAC, both of which have heard about his dispute with BMI, are now demanding license fees of their own — about $2,000 and $1,100 respectively.

“I knew this would wake them up and it did,” Wagner says. “The main issue is live music is very expensive, and this is one more expense. These fees can break a place and they threaten the livelihood of live music venues. And in reality, small clubs are doing more for the musicians than royalties.”

Bailey says if clubs struggle to pay their licenses then perhaps they weren’t financial solvent to begin with.

“Those club owners have a lot more problems than their music license,” he says. “I’m not sure their music license alone would put them out of business.”

Still, Bailey says, BMI doesn’t want to be known for its lawsuits or for being a bully.

“When they begin to understand copyright law most businesses will comply,” he says. “We also realize when reporters write stories it does help us license more businesses because it makes some business owners more aware of their legal responsibilities and it will scare some business owners. But that’s not the way we like to license. We like to educate people, we don’t like to scare them.” CV

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